Edgar Filing: DANA HOLDING CORP

DAN-2013.09.30-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the quarterly period ended: September 30, 2013

Commission File Number: 1-1063

Dana Holding Corporation

(Exact name of registrant as specified in its charter)



Delaware		26-1531856
(State of incorporation)		(IRS Employer Identification Number)

3939 Technology Drive, Maumee, OH		43537
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (419) 887-3000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

There were 146,904,211 shares of the registrant’s common stock outstanding at October 11, 2013.

DANA HOLDING CORPORATION – FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013

TABLE OF CONTENTS



		10-Q Pages

PART I – FINANCIAL INFORMATION

Item 1	Financial Statements
	Consolidated Statement of Operations (Unaudited)	3
	Consolidated Statement of Comprehensive Income (Unaudited)	4
	Consolidated Balance Sheet (Unaudited)	5
	Consolidated Statement of Cash Flows (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4	Controls and Procedures	41

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	42

Item 1A	Risk Factors	42

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 6	Exhibits	42

Signatures		43
Exhibit Index		44

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dana Holding Corporation

Consolidated Statement of Operations (Unaudited)

(In millions except per share amounts)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Net sales	$	1,669		$	1,715		$	5,145		$	5,615
Costs and expenses
Cost of sales	1,434			1,477			4,437			4,838
Selling, general and administrative expenses	97			99			305			322
Amortization of intangibles	18			18			55			56
Restructuring charges, net	8			6			14			30
Other income, net	18			2			38			9
Income from continuing operations before interest expense and income taxes	130			117			372			378
Interest expense	27			22			69			63
Income from continuing operations before income taxes	103			95			303			315
Income tax expense	34			33			96			97
Equity in earnings of affiliates	3			(2		)	10			4
Income from continuing operations	72			60			217			222
Loss from discontinued operations	(1		)	—			—			—
Net income	71			60			217			222
Less: Noncontrolling interests net income	3			4			15			10
Net income attributable to the parent company	68			56			202			212
Preferred stock dividend requirements	6			8			21			23
Preferred stock redemption premium	232						232
Net income (loss) available to common stockholders	$	(170	)	$	48		$	(51	)	$	189

Net income (loss) per share available to parent company common stockholders:
Basic:
Income (loss) from continuing operations	$	(1.15	)	$	0.32		$	(0.35	)	$	1.28
Loss from discontinued operations	$	(0.01	)	$	—		$	—		$	—
Net income (loss)	$	(1.16	)	$	0.32		$	(0.35	)	$	1.28

Diluted:
Income (loss) from continuing operations	$	(1.15	)	$	0.26		$	(0.35	)	$	0.99
Loss from discontinued operations	$	(0.01	)	$	—		$	—		$	—
Net income (loss)	$	(1.16	)	$	0.26		$	(0.35	)	$	0.99

Weighted-average common shares outstanding
Basic	145.8			148.1			146.6			147.8
Diluted	145.8			214.5			146.6			214.7

Dividends declared per common share	$	0.05		$	0.05		$	0.15		$	0.15

The accompanying notes are an integral part of the consolidated financial statements.

Dana Holding Corporation

Consolidated Statement of Comprehensive Income (Unaudited)

(In millions)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Net income	$	71		$	60		$	217		$	222
Less: Noncontrolling interests net income	3			4			15			10
Net income attributable to the parent company	68			56			202			212

Other comprehensive income (loss) attributable to the parent company, net of tax:
Currency translation adjustments	30			25			(34		)	(10		)
Hedging gains and losses	(1		)	4			(4		)	12
Investment and other gains and losses	3						(6		)	1
Defined benefit plans	6			(2		)	20			4
Other comprehensive income (loss) attributable to the parent company	38			27			(24		)	7

Other comprehensive income (loss) attributable to noncontrolling interests, net of tax:
Currency translation adjustments	1			2			(4		)	2
Hedging gains and losses	1						1
Other comprehensive income (loss) attributable to noncontrolling interests	2			2			(3		)	2

Total comprehensive income attributable to the parent company	106			83			178			219
Total comprehensive income attributable to noncontrolling interests	5			6			12			12
Total comprehensive income	$	111		$	89		$	190		$	231

The accompanying notes are an integral part of the consolidated financial statements.

Dana Holding Corporation

Consolidated Balance Sheet (Unaudited)

(In millions except share and per share amounts)



	September 30, 2013			December 31, 2012
Assets
Current assets
Cash and cash equivalents	$	1,121		$	1,059
Marketable securities	105			60
Accounts receivable
Trade, less allowance for doubtful accounts of $8 in 2013 and 2012	916			818
Other	171			170
Inventories
Raw materials	395			388
Work in process and finished goods	379			354
Other current assets	114			104
Total current assets	3,201			2,953
Goodwill	104			101
Intangibles	253			325
Other noncurrent assets	271			324
Investments in affiliates	215			202
Property, plant and equipment, net	1,200			1,239
Total assets	$	5,244		$	5,144

Liabilities and equity
Current liabilities
Notes payable, including current portion of long-term debt	$	64		$	101
Accounts payable	872			766
Accrued payroll and employee benefits	166			160
Accrued restructuring costs	13			23
Taxes on income	59			63
Other accrued liabilities	172			197
Total current liabilities	1,346			1,310
Long-term debt	1,568			803
Pension and postretirement obligations	638			715
Other noncurrent liabilities	357			368
Total liabilities	3,909			3,196
Commitments and contingencies (Note 13)
Parent company stockholders' equity
Preferred stock, 50,000,000 shares authorized
Series A, $0.01 par value, zero and 2,500,000 shares outstanding	—			242
Series B, $0.01 par value, 4,328,537 and 5,221,199 shares outstanding	423			511
Common stock, $0.01 par value, 450,000,000 shares authorized, 145,204,001 and 148,264,067 outstanding	2			2
Additional paid-in capital	2,745			2,668
Accumulated deficit	(835		)	(762		)
Treasury stock, at cost (14,381,673 and 1,797,988 shares)	(277		)	(25		)
Accumulated other comprehensive loss	(820		)	(793		)
Total parent company stockholders' equity	1,238			1,843
Noncontrolling equity	97			105
Total equity	1,335			1,948
Total liabilities and equity	$	5,244		$	5,144

The accompanying notes are an integral part of the consolidated financial statements.

Dana Holding Corporation

Consolidated Statement of Cash Flows (Unaudited)

(In millions)



	Nine Months Ended September 30,
	2013			2012
Operating activities
Net income	$	217		$	222
Depreciation	123			142
Amortization of intangibles	65			66
Amortization of deferred financing charges	4			4
Unremitted earnings of affiliates	(8		)	(1		)
Stock compensation expense	14			14
Deferred income taxes	5			(9		)
Pension contributions, net	(56		)	(204		)
Interest payment received on payment-in-kind note receivable	26
Change in working capital	(75		)	(116		)
Other, net	(22		)	3
Net cash provided by operating activities	293			121

Investing activities
Purchases of property, plant and equipment	(123		)	(113		)
Acquisition of business	(8		)	(7		)
Principal payment received on payment-in-kind note receivable	33
Purchases of marketable securities	(80		)	(13		)
Proceeds from sales of marketable securities	28			12
Proceeds from maturities of marketable securities	7			3
Proceeds from sale of businesses	1			7
Other	8			(3		)
Net cash used in investing activities	(134		)	(114		)

Financing activities
Net change in short-term debt	(11		)	26
Proceeds from long-term debt	811			40
Repayment of long-term debt	(55		)	(14		)
Deferred financing payments	(17		)
Preferred stock redemption	(474		)
Dividends paid to preferred stockholders	(23		)	(23		)
Dividends paid to common stockholders	(22		)	(22		)
Distributions to noncontrolling interests	(11		)	(9		)
Repurchases of common stock	(288		)
Payments to acquire noncontrolling interests	(7		)
Other	7			(1		)
Net cash used in financing activities	(90		)	(3		)

Net increase in cash and cash equivalents	69			4
Cash and cash equivalents – beginning of period	1,059			931
Effect of exchange rate changes on cash balances	(7		)	5
Cash and cash equivalents – end of period	$	1,121		$	940

The accompanying notes are an integral part of the consolidated financial statements.

Dana Holding Corporation

Index to Notes to Consolidated Financial Statements



1.	Organization and Summary of Significant Accounting Policies

2.	Acquisitions and Divestitures

3.	Discontinued Operations

4.	Goodwill and Other Intangible Assets

5.	Restructuring of Operations

6.	Stockholders' Equity

7.	Earnings per Share

8.	Stock Compensation

9.	Pension and Postretirement Benefit Plans

10.	Marketable Securities

11.	Financing Agreements

12.	Fair Value Measurements and Derivatives

13.	Commitments and Contingencies

14.	Warranty Obligations

15.	Income Taxes

16.	Other Income, Net

17.	Segments

18.	Equity Affiliates

Notes to Consolidated Financial Statements (Unaudited)

(In millions, except share and per share amounts)

Note 1. Organization and Summary of Significant Accounting Policies

General

Dana Holding Corporation (Dana) is headquartered in Maumee, Ohio and was incorporated in Delaware in 2007. As a leading supplier of driveline products (axles, driveshafts and transmissions), power technologies (sealing and thermal management products) and genuine service parts for vehicle manufacturers, our customer base includes virtually every major vehicle manufacturer in the global light vehicle, medium/heavy vehicle and off-highway markets.

The terms "Dana," "we," "our" and "us," when used in this report, are references to Dana. These references include the subsidiaries of Dana unless otherwise indicated or the context requires otherwise.

Summary of significant accounting policies

Basis of presentation — Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. These statements are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the consolidated financial statements in Item 8 of our 2012 Form 10-K.

Discontinued operations — We classify a business component that has been disposed of or classified as held for sale as discontinued operations if the cash flows of the component have been or will be eliminated from our ongoing operations and we will no longer have any significant continuing involvement in or with the component. The results of operations of our discontinued operations, including any gains or losses on disposition, are aggregated and presented on one line in the consolidated statement of operations. See Note 3 for additional information regarding our discontinued operations.

Recently adopted accounting pronouncements

In December 2011, the Financial Accounting Standards Board (FASB) issued guidance to enhance disclosures about offsetting assets and liabilities. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The guidance was effective January 1, 2013. The adoption of this guidance did not impact our financial condition or results of operations.

Recently issued accounting pronouncements

In July 2013, the FASB issued guidance to clarify financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Generally, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. An exception exists to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose. If the exception applies, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments will be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is also permitted. Adoption of this guidance will not impact our financial condition or results of operations.

In July 2013, the FASB issued guidance to provide for the inclusion of the Fed Funds Effective Swap Rate as a U.S. benchmark interest rate for hedge accounting purposes, in addition to direct Treasury obligations of the U.S. government and the London Interbank Offered Rate (LIBOR) swap rate. In addition, the guidance removes the restriction on using different

benchmark interest rates for similar hedges. The guidance is effective immediately, and can be applied prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013.

In March 2013, the FASB issued guidance to clarify existing requirements for the release - the recognition of an amount in the income statement - of the cumulative translation adjustment. The guidance applies to the release of cumulative translation adjustment when an entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. It also applies to the release of the cumulative translation adjustment when there is a loss of a controlling financial interest in a foreign entity or a step acquisition involving an equity method investment that is a foreign entity. The accounting for the financial interest within a foreign entity is the same regardless of the form of the transaction. The guidance will be applied to relevant transactions that occur on or after January 1, 2014. The impact related to this guidance is not presently determinable.

In February 2013, the FASB issued guidance related to obligations resulting from joint and several liability arrangements where the amount of the obligation is fixed at the reporting date. Obligations within the scope of the guidance include certain debt arrangements and settled litigation but not contingencies, guarantees, retirement benefits or income taxes. The guidance, which is effective January 1, 2014, is not expected to impact our financial condition or results of operations.

In July 2012, the FASB issued guidance to provide an option in a company's annual indefinite-lived intangible asset impairment test to first assess qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that an asset is impaired. If, after assessing all events and circumstances, it is determined that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount. The changes are effective for annual and interim impairment tests performed after January 1, 2013. Adoption of this guidance will not impact our financial condition or results of operations.

Note 2. Acquisitions and Divestitures

Fallbrook — On September 10, 2012, we entered into a strategic alliance with Fallbrook Technologies Inc. (Fallbrook). Among the agreements executed was an exclusive license agreement allowing Dana to engineer, produce and sell transmission components and other advanced powertrain solutions with Fallbrook’s continuously variable planetary (CVP) technology for passenger and certain off-highway vehicles in the end markets Dana serves. The exclusive license agreement, along with an engineering services agreement and key engineers hired from Fallbrook, provide Dana with intellectual property, processes, techniques, technical data, training, designs and drawings related to the development, application, use, manufacture and production of the CVP technology. The transaction with Fallbrook has been accounted for as a business combination.

Dana paid Fallbrook $20 under the exclusive license agreement for the markets licensed to Dana; $7 was paid at closing, $5 was paid during the fourth quarter of 2012 and $8 was paid during the first half of 2013. The aggregate fair value of the assets acquired of $20 has been allocated to intangible assets used in research and development activities which are initially classified as indefinite-lived with $12 and $8 assigned to our Off-Highway and Light Vehicle Driveline (LVD) operating segments, respectively. We used the multi-period excess earnings method, an income approach, to value the intangible assets used in research and development activities.

Divestiture of Structural Products business — In March 2010, we sold substantially all of the assets of our Structural Products business to Metalsa S.A. de C.V. (Metalsa). Approximately $12 of the proceeds was paid into escrow. The agreement provided for those funds to be released to Dana by June 2012; however, the buyer has presented claims to the escrow agent seeking indemnification from Dana. The escrow agent is precluded from releasing the funds held in escrow until Dana and the buyer resolve the issues underlying the claims. The parties are pursuing an arbitration process to resolve the issues with arbitration currently expected to take place during the fourth quarter. Dana does not presently believe that any obligation to indemnify the buyer will be material.

Other — We completed the divestiture of our axle, differential and brake systems business serving the leisure, all-terrain and utility vehicle markets in August 2012. Proceeds of $7 and $1 received in the third and fourth quarters of 2012 approximated the net assets of the business following an asset impairment charge of $2 recorded in the first quarter of 2012. Sales of the divested business approximated $32 in 2012 through the date of the disposition.

Note 3. Discontinued Operations

The sale of substantially all of the assets of our Structural Products business in 2010 excluded the facility in Longview, Texas and its employees and manufacturing assets related to a significant customer contract. The customer contract was satisfied and operations concluded in August 2012. As a result of the cessation of all operations, the former Structural Products business has been presented as discontinued operations in the accompanying financial statements.

The results of the discontinued operations were as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013		2012
Sales	$	—		$	8	$	—	$	34
Cost of sales	1			7		2		30
Restructuring charges, net				1		1		3
Other income (expense), net						3		(1		)
Pre-tax loss	(1		)	—		—		—
Income tax expense	—			—		—		—
Loss from discontinued operations	$	(1	)	$	—	$	—	$	—

The Longview facility was sold in March 2013 for an amount that approximated its carrying value. A previously closed plant in Canada remains on the balance sheet with a book value of $4 at September 30, 2013. Other assets and liabilities related to the discontinued operations at September 30, 2013 were not material.

Note 4. Goodwill and Other Intangible Assets

Goodwill — Our goodwill is assigned to our Off-Highway operating segment. The changes in the carrying amount of goodwill are due to currency fluctuations.

Components of other intangible assets —



		September 30, 2013							December 31, 2012
	Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortizable intangible assets
Core technology	7	$	94	$	(79	)	$	15	$	93	$	(69	)	$	24
Trademarks and trade names	16	4		(1		)	3		4		(1		)	3
Customer relationships	8	530		(380		)	150		538		(325		)	213
Non-amortizable intangible assets
Trademarks and trade names		65					65		65					65
Used in research and development activities		20					20		20					20
		$	713	$	(460	)	$	253	$	720	$	(395	)	$	325

The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at September 30, 2013 were as follows: LVD — $15, Power Technologies — $22, Commercial Vehicle — $136 and Off-Highway — $80.

Amortization expense related to amortizable intangible assets —



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Charged to cost of sales	$	4	$	4	$	10	$	10
Charged to amortization of intangibles	18		18		55		56
Total amortization	$	22	$	22	$	65	$	66

The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on September 30, 2013 exchange rates. Actual amounts may differ from these estimates due to such factors as currency translation, customer turnover, impairments, additional intangible asset acquisitions and other events.



	Remainder of 2013		2014		2015		2016		2017
Amortization expense	$	22	$	50	$	22	$	20	$	17

Note 5. Restructuring of Operations

Our restructuring activities primarily include rationalizing our operating footprint by consolidating facilities, positioning operations in lower cost locations and reducing overhead costs. Restructuring expense includes costs associated with current and previously announced actions and is comprised of contractual and noncontractual separation costs and exit costs, including costs associated with lease continuation obligations and certain operating costs of facilities that we are in the process of closing.

During the third quarter of 2013, we approved additional headcount reduction programs, primarily attributable to our Commercial Vehicle operation in Argentina. Including costs associated with this action and with other previously announced initiatives, restructuring expense during the third quarter of 2013 was $8, including $3 of severance and related benefits costs and $5 of exit costs.

During the first and second quarters of 2013, we implemented certain headcount reduction initiatives, primarily in our Light Vehicle and Commercial Vehicle businesses in Argentina and Australia. New customer programs and other developments in our North American Light Vehicle business and a decision by our European Off-Highway business to in-source the manufacturing of certain parts resulted in the reversal of previously accrued severance obligations. During the first nine months of 2013, restructuring expense was $14, net of the aforementioned reversals, and was attributable to the cost of newly implemented and previously announced initiatives. Including an additional $1 associated with discontinued operations, the total cost represents $6 of severance and related benefits costs and $9 of exit costs.

During the third quarter of 2012, we implemented certain cost reduction programs, including a headcount reduction program at certain of our South American manufacturing operations and the realignment of our North American regional operations. Total restructuring expense in the third quarter of 2012 to recognize these costs as well as costs associated with previously announced initiatives was $6. Including an additional $1 of costs associated with discontinued operations, the total cost represented $4 of severance and related benefits costs and $3 of exit costs.

During the first and second quarters of 2012, we implemented and recognized the costs of specific headcount reduction initiatives, primarily associated with certain of our South American operations. Additionally, we exited our Kalamazoo, Michigan facility and recognized the fair value of the associated lease continuation obligation. During the first nine months of 2012, restructuring expense to recognize the costs of these actions as well as costs associated with other previously announced initiatives was $30. Including an additional $3 associated with discontinued operations, the total cost represented $15 of severance and related benefits costs and $18 of exit costs.

Restructuring charges and related payments and adjustments —



	Employee Termination Benefits			Exit Costs			Total
Balance at June 30, 2013, including noncurrent portion	$	14		$	11		$	25
Activity during the period:
Charges to restructuring	4			6			10
Adjustments of accruals	(1		)	(1		)	(2		)
Cash payments	(5		)	(4		)	(9		)
Balance at September 30, 2013, including noncurrent portion	$	12		$	12		$	24

Balance at December 31, 2012, including noncurrent portion	$	27		$	13		$	40
Activity during the period:
Charges to restructuring	14			9			23
Adjustments of accruals	(8		)	(1		)	(9		)
Discontinued operations charges				1			1
Cash payments	(21		)	(10		)	(31		)
Balance at September 30, 2013, including noncurrent portion	$	12		$	12		$	24

At September 30, 2013, the accrued employee termination benefits relate to the reduction of approximately 300 employees to be completed over the next three years. The exit costs relate primarily to lease continuation obligations. We estimate cash expenditures to approximate $7 in the fourth quarter of 2013 and $17 thereafter.

Cost to complete — The following table provides project-to-date and estimated future expenses for completion of our pending restructuring initiatives.



	Expense Recognized							Future Cost to Complete
	Prior to 2013		2013			Total to Date		Future Cost to Complete
LVD	$	18	$	5		$	23	$	6
Power Technologies	9					9		2
Commercial Vehicle	19		9			28		8
Off-Highway	8		(2		)	6		1
Corporate			2			2
Discontinued operations	4		1			5		4
Total	$	58	$	15		$	73	$	21

The future cost to complete includes estimated separation costs, primarily those associated with one-time benefit programs, and exit costs, including lease continuation costs, equipment transfers and other costs which are required to be recognized as closures are finalized or as incurred during the closure.

Note 6. Stockholders’ Equity

Series A and Series B preferred stock — Dividends on our 4.0% Series A Convertible Preferred Stock (Series A preferred stock) and 4.0% Series B Convertible Preferred Stock (Series B preferred stock) are accrued monthly and are payable in cash as approved by the Board of Directors. Preferred dividends accrued but not paid were $4 and $8 at September 30, 2013 and December 31, 2012.

In August 2013, we paid $474 to redeem our Series A preferred stock, including $3 of redemption costs. The amount paid exceeded the $242 carrying value of our Series A preferred stock. The $232 redemption premium was charged directly to accumulated deficit on our balance sheet. The redemption premium is treated like a dividend on preferred stock and deducted from net income attributable to the parent company in arriving at net income (loss) available to common stockholders.

During the first nine months of 2013, holders of 892,662 shares of Series B preferred stock elected to convert those preferred shares into common stock and received 7,541,105 shares. The common stock issued included shares to satisfy the

accrued dividends owed to the converting preferred stockholders. Based on the market price of Dana common stock on the date of conversion, the fair value of the conversions totaled $158.

Common stock — Our Board of Directors declared a quarterly cash dividend of five cents per share of common stock in the first, second and third quarters of 2013. Dividends accrue on restricted stock units granted under our stock compensation program and will be paid in cash or additional units only when the underlying units vest.

Share repurchase program — On October 25, 2012, our Board of Directors approved a share repurchase program of up to $250 of our outstanding shares of common stock over a two-year period. On June 28, 2013, our Board of Directors approved an expansion of the share repurchase program to up to $1,000 over the next two years. The stock repurchases are subject to prevailing market conditions and other considerations.

Under the program, we spent $88 to repurchase 5,075,740 shares of our common stock during the first nine months of 2013 through open market and privately negotiated transactions.

On August 12, 2013, we entered into an accelerated share repurchase (ASR) agreement with a third-party financial institution to repurchase $200 of our common stock. In the third quarter of 2013, we paid $200 to the financial institution and received an initial delivery of 7,302,602 shares. This initial share delivery represented 80% of the ASR transaction's value at the then-current price of $21.91 per share. These shares have been included in common stock held in treasury as of the applicable delivery date. The remaining 20% of the ASR transaction's value, or $40, has been deducted from additional paid-in-capital in the accompanying consolidated balance sheet as of September 30, 2013, and will be transferred to common stock held in treasury upon settlement of the ASR transaction. The ultimate number of shares to be repurchased and the final price paid per share under the ASR transaction will generally be based on the average of the daily volume-weighted average prices of our common stock during the term of the ASR agreement, less an agreed upon discount. At settlement, if the ultimate number of shares to be repurchased exceeds the number of shares initially delivered, we will receive additional shares from the financial institution. If the ultimate number of shares to be repurchased is less than the number of shares initially delivered, we have the contractual right to either deliver additional shares or cash equal to the value of those shares to the financial institution. The ASR agreement has a maximum term of three and a half months, but may conclude earlier at the option of the third-party financial institution.

Taking into account the Series A preferred stock redemption and the ASR transaction, $220 remained available under the program for future share repurchases as of September 30, 2013.

Changes in equity —



	2013									2012
Three Months Ended September 30,	Attributable to Parent			Attributable to Non- controlling Interests			Total Equity			Attributable to Parent			Attributable to Non- controlling Interests			Total Equity
Balance, June 30	$	1,813		$	98		$	1,911		$	1,851		$	99		$	1,950
Total comprehensive income	106			5			111			83			6			89
Preferred stock dividends	(6		)				(6		)	(8		)				(8		)
Common stock dividends	(7		)				(7		)	(7		)				(7		)
Distributions to noncontrolling interests				(6		)	(6		)				(1		)	(1		)
Common stock share repurchases	(2		)				(2		)
Accelerated share repurchase	(200		)				(200		)
Preferred stock redemption	(474		)				(474		)
Repurchase of equity awards	(2		)				(2		)
Stock compensation	10						10			4						4
Balance, September 30	$	1,238		$	97		$	1,335		$	1,923		$	104		$	2,027

Nine Months Ended September 30,
Balance, December 31	$	1,843		$	105		$	1,948		$	1,737		$	101		$	1,838
Total comprehensive income	178			12			190			219			12			231
Preferred stock dividends	(21		)				(21		)	(23		)				(23		)
Common stock dividends	(22		)				(22		)	(22		)				(22		)
Distributions to noncontrolling interests				(11		)	(11		)				(9		)	(9		)
Common stock share repurchases	(88		)				(88		)
Accelerated share repurchase	(200		)				(200		)
Preferred stock redemption	(474		)				(474		)

Repurchase of equity awards	(2		)				(2		)
Adjustments to paid-in capital for purchase of noncontrolling interests	6						6
Adjustments to other comprehensive income for purchase of noncontrolling interests	(3		)				(3		)
Purchase of noncontrolling interests				(9		)	(9		)
Stock compensation	25						25			13						13
Stock withheld for employee taxes	(4		)				(4		)	(1		)				(1		)
Balance, September 30	$	1,238		$	97		$	1,335		$	1,923		$	104		$	2,027

Changes in components of Accumulated Other Comprehensive Income (Loss) (AOCI) of the parent —



	Parent Company Stockholders
	Foreign Currency Translation			Hedging			Investments		Defined Benefit Plans			Accumulated Other Comprehensive Income (Loss)
Balance, June 30, 2013	$	(266	)	$	1		$	3	$	(596	)	$	(858	)
Other comprehensive income (loss):
Currency translation adjustments	30											30
Holding gains (losses)							3					3
Reclassification of amount to net income (a)				(1		)						(1		)
Amortization of net actuarial losses included in net periodic benefit cost (b)									6			6
Other comprehensive income (loss)	30			(1		)	3		6			38
Balance, September 30, 2013	$	(236	)	$	—		$	6	$	(590	)	$	(820	)

Balance, June 30, 2012	$	(227	)	$	(2	)	$	11	$	(452	)	$	(670	)
Other comprehensive income (loss):
Currency translation adjustments	25											25
Holding gains (losses)				4								4
Reclassification of amount to net income (a)				1								1
Plan amendments									(6		)	(6		)
Amortization of net actuarial losses included in net periodic benefit cost (b)									4			4
Tax expense				(1		)						(1		)
Other comprehensive income (loss)	25			4			—		(2		)	27
Balance, September 30, 2012	$	(202	)	$	2		$	11	$	(454	)	$	(643	)



Balance, December 31, 2012	$	(198	)	$	3		$	12		$	(610	)	$	(793	)
Other comprehensive income (loss):
Currency translation adjustments	(34		)										(34		)
Holding gains (losses)				2			2						4
Reclassification of amount to net income (a)				(6		)	(8		)				(14		)
Venezuelan bolivar devaluation										2			2
Amortization of net actuarial losses included in net periodic benefit cost (b)										18			18
Other comprehensive income (loss)	(34		)	(4		)	(6		)	20			(24		)
Adjustment for purchase of noncontrolling interests	(4		)	1									(3		)
Balance, September 30, 2013	$	(236	)	$	—		$	6		$	(590	)	$	(820	)

Balance, December 31, 2011	$	(192	)	$	(10	)	$	10		$	(458	)	$	(650	)
Other comprehensive income (loss):
Currency translation adjustments	(10		)										(10		)
Holding gains (losses)				8			1						9
Reclassification of amount to net income (a)				7									7
Plan amendments										(6		)	(6		)
Net actuarial loss										(1		)	(1		)
Amortization of net actuarial losses included in net periodic benefit cost (b)										11			11
Tax expense				(3		)							(3		)
Other comprehensive income (loss)	(10		)	12			1			4			7
Balance, September 30, 2012	$	(202	)	$	2		$	11		$	(454	)	$	(643	)

(a) Foreign currency contract and investment reclassifications are included in other income, net.

(b) See Note 9 for additional details.

During the first quarter of 2013, Dana purchased the noncontrolling interests in three of its subsidiaries for $7. Dana maintained its controlling financial interest in each of the subsidiaries and accounted for the purchases as equity transactions. The difference between the fair value of the consideration paid and the carrying value of the noncontrolling interests was recognized as additional paid-in capital of the parent company. At the time of the purchases the subsidiaries had accumulated other comprehensive income. Accumulated other comprehensive income of the parent company has been adjusted to reflect the ownership interest change with a corresponding offset to additional paid-in capital of the parent company.

Note 7. Earnings per Share

Reconciliation of the numerators and denominators of the earnings per share calculations —



	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
Income from continuing operations	$	72		$	60	$	217		$	222
Less: Noncontrolling interests	3			4		15			10
Less: Preferred stock dividend requirements	6			8		21			23
Less: Preferred stock redemption premium	232					232
Income (loss) from continuing operations available to common stockholders - Numerator basic	(169		)	48		(51		)	189
Preferred stock dividend requirements				8					23
Numerator diluted	$	(169	)	$	56	$	(51	)	$	212

Net income (loss) available to common stockholders - Numerator basic	$	(170	)	$	48	$	(51	)	$	189
Preferred stock dividend requirements				8					23
Numerator diluted	$	(170	)	$	56	$	(51	)	$	212


Weighted-average number of shares outstanding - Denominator basic	145.8			148.1		146.6			147.8
Employee compensation-related shares, including stock options				1.7					2.2
Conversion of preferred stock				64.7					64.7
Denominator diluted	145.8			214.5		146.6			214.7

The share count for diluted earnings per share is computed on the basis of the weighted-average number of common shares outstanding plus the effects of dilutive common stock equivalents (CSEs) outstanding during the period. We excluded 0.1 million and 1.6 million CSEs from the calculations of diluted earnings per share for the respective quarters ended September 30 and 0.4 million and 1.1 million CSEs from the calculations of diluted earnings per share for the respective year-to-date periods ended September 30 as the effect of including them would have been anti-dilutive. In addition, we excluded CSEs that satisfied the definition of potentially dilutive shares of 1.7 million and 1.6 million for the quarter and nine months ended September 30, 2013 since there was no net income available to common stockholders for these periods.

We excluded 7.3 million and 16.3 million shares related to the assumed conversion of our Series A preferred stock for the quarter and nine months ended September 30, 2013, and 38.8 million and 42.1 million shares related to the assumed conversion of our Series B preferred stock for the same periods, along with the adjustment for the related dividend requirements, as the conversions would have been anti-dilutive for these periods.

Note 8. Stock Compensation

The Compensation Committee of our Board of Directors approved the grant of stock options, stock appreciation rights (SARs) and restricted stock units (RSUs) shown in the table below during the first nine months of 2013.



		Weighted-average Per Share
	Granted (In millions)	Exercise Price		Grant Date Fair Value
Stock options	0.9	$	16.21	$	7.46
SARs	0.2	$	16.19	$	7.45
RSUs	0.5			$	16.28

Stock options and SARs related to 1.5 million shares were exercised and an insignificant number of shares were forfeited in 2013. We received $14 of cash from the exercise of stock options and we paid $4 of cash to settle SARs and performance share units during 2013. We also issued 0.2 million in RSUs and 0.4 million in performance shares based on vesting.

We estimated fair values for options and SARs granted during 2013 using the following key assumptions as part of the Black-Scholes option pricing model. The expected term was estimated using the simplified method because the limited period of time our common stock has been publicly traded provides insufficient historical exercise data. The risk-free rate was based on U.S. Treasury security yields at the time of grant. The dividend yield was calculated by dividing the expected annual dividend by the average stock price of our common stock over the prior year. The expected volatility was estimated using a combination of the historical volatility of similar entities and the implied volatility of our exchange-traded options.



	Options		SARs
Expected term (in years)	6.00		6.00
Risk-free interest rate	1.07	%	1.07	%
Dividend yield	1.41	%	1.41	%
Expected volatility	55.80	%	55.80	%

We recognized stock compensation expense of $5 and $4 during the third quarter of 2013 and 2012 and $14 in both of the nine-month periods of 2013 and 2012. At September 30, 2013, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $23. This cost is expected to be recognized over a weighted-average period of 1.9 years.

Note 9. Pension and Postretirement Benefit Plans

We have a number of defined contribution and defined benefit, qualified and nonqualified, pension plans covering eligible employees. Other postretirement benefits (OPEB), including medical and life insurance, are provided for certain employees upon retirement.

Components of net periodic benefit costs —



	Pension
	2013					2012						OPEB - Non-U.S.
Three Months Ended September 30,	U.S.			Non-U.S.		U.S.			Non-U.S.			2013		2012
Interest cost	$	18		$	3	$	21		$	3		$	2	$	1
Expected return on plan assets	(29		)			(28		)
Service cost				1					1
Amortization of net actuarial loss	5			1		4
Net periodic (benefit) cost	$	(6	)	$	5	$	(3	)	$	4		$	2	$	1

Nine Months Ended September 30,
Interest cost	$	56		$	9	$	64		$	9		$	4	$	4
Expected return on plan assets	(87		)			(84		)	(1		)
Service cost				4					3
Amortization of net actuarial loss	15			3		11
Net periodic (benefit) cost	$	(16	)	$	16	$	(9	)	$	11		$	4	$	4

We have contributed $40 to the U.S. pension plans during 2013.

Note 10. Marketable Securities



	September 30, 2013						December 31, 2012
	Cost		Unrealized Gain (Loss)		Fair Value		Cost		Unrealized Gain (Loss)		Fair Value
U.S. government securities	$	27	$	—	$	27	$	7	$	—	$	7
Corporate securities	30				30		11				11
Certificates of deposit	17				17		16				16
Other	31				31		25		1		26
Total marketable securities	$	105	$	—	$	105	$	59	$	1	$	60

U.S. government securities include bonds issued by government-sponsored agencies and Treasury notes. Corporate securities include both debt and equity securities. Other consists of investments in mutual and index funds. U.S. government securities, corporate debt and certificates of deposit maturing in one year or less, after one year through five years and after five years total $18, $55 and $1 at September 30, 2013.

Note 11. Financing Agreements

Long-term debt at —



	Interest Rate	September 30, 2013		December 31, 2012
Senior Notes due February 15, 2019	6.500%	$	400	$	400
Senior Notes due February 15, 2021	6.750%	350		350
Senior Notes due September 15, 2021	5.375%	450
Senior Notes due September 15, 2023	6.000%	300
Other indebtedness		102		109
Total		1,602		859
Less: current maturities		34		56
Total long-term debt		$	1,568	$	803

The weighted-average interest rate on the senior notes was 6.12% at September 30, 2013. Interest on the senior notes is payable semi-annually.

Senior notes — In July 2013, we completed the sale of $750 in senior unsecured notes (the New Senior Notes). Interest on the New Senior Notes is payable on March 15 and September 15 of each year beginning on March 15, 2014. Net proceeds of the offering totaled $734. Financing costs of $16 were recorded as deferred costs and are being amortized to interest expense over the life of the New Senior Notes. A portion of the net proceeds from the offering were used to repurchase all of our outstanding Series A preferred stock and to fund the ASR transaction. The remaining net proceeds will be used to fund our previously authorized share repurchase program and for other general corporate purposes.

We may redeem some or all of the New Senior Notes at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to the redemption date, if redeemed during the 12-month period commencing on September 15 of the years set forth below:



	Redemption Price
Year	September 2021 Notes		September 2023 Notes
2016	104.031	%
2017	102.688	%
2018	101.344	%	103.000	%
2019	100.000	%	102.000	%
2020	100.000	%	101.000	%
2021			100.000	%
2022			100.000	%

Prior to September 15, 2016 for the Senior Notes due September 2021 Notes (the September 2021 Notes) and prior to September 15, 2018 for the Senior Notes due September 2023 Notes (the September 2023 Notes), we may redeem some or all of such notes at a price equal to the principal amount thereof, plus accrued and unpaid interest, plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.

At any time prior to September 15, 2016, we may redeem up to 35% of original aggregate principal amount of each of the September 2021 Notes and September 2023 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 105.375% (for the September 2021 Notes) and 106.000% (for the September 2023 Notes) of the principal amount of such notes, plus accrued and unpaid interest thereon, provided that at least 50% of the original aggregate principal amount of the September 2021 Notes (for redemptions of September 2021 Notes) and September 2023 Notes (for redemptions of September 2023 Notes) remain outstanding after giving effect to any such redemption.

Revolving facility — On June 20, 2013, we received commitments from existing lenders for a $500 amended and restated revolving credit facility (the Amended Revolving Facility) which expires on June 20, 2018. In connection with Amended Revolving Facility, we paid $3 in deferred financing costs to be amortized to interest expense over the life of the facility. We wrote off $2 of previously deferred financing costs associated with our prior revolving credit facility to other income, net.

The Amended Revolving Facility is guaranteed by all of our domestic subsidiaries except for Dana Credit Corporation and Dana Companies, LLC and their respective subsidiaries (the guarantors) and grants a first priority lien on Dana's and the guarantors' accounts receivable and inventories and, under certain circumstances, to the extent Dana and the guarantors grant a first-priority lien on certain other assets and property, a second-priority lien on such other assets and property.

Advances under the Amended Revolving Facility bear interest at a floating rate based on, at our option, the base rate or London Interbank Offered Rate (LIBOR) (each as described in the revolving credit agreement) plus a margin based on the undrawn amounts available under the agreement as set forth below:



Remaining Borrowing Availability	Base Rate		LIBOR Rate
Greater than $350	0.50	%	1.50	%
Greater than $150 but less than or equal to $350	0.75	%	1.75	%
$150 or less	1.00	%	2.00	%

Commitment fees are applied based on the average daily unused portion of the available amounts under the Amended Revolving Facility. If the average daily unused portion of the revolving facility is less than 50%, the applicable fee will be 0.25% per annum. If the average daily unused portion of the revolving facility is equal to or greater than 50%, the applicable fee will be 0.375% per annum. Up to $300 of the revolving facility may be applied to letters of credit, which reduces availability. We pay a fee for issued and undrawn letters of credit in an amount per annum equal to the applicable LIBOR margin based on quarterly average availability under the revolving facility and a per annum fronting fee of 0.125%, payable quarterly.

There were no borrowings under the revolving facility at September 30, 2013 but we had utilized $64 for letters of credit. Based on our borrowing base collateral of $346, we had potential availability at September 30, 2013 under the revolving facility of $282 after deducting the outstanding letters of credit.

European receivables loan facility — Certain of our European subsidiaries participate in an accounts receivable backed credit facility (the European Facility) which permits borrowings of up to €75 ($101 at the September 30, 2013 exchange rate). Availability through the European Facility is subject to the existence of adequate levels of supporting accounts receivable. Advances from the European Facility bear interest based on the LIBOR applicable to the currency in which each advance is denominated or an Alternate Base Rate (as defined). We pay a fee on the unused amount of the European Facility, in addition to other customary fees. At September 30, 2013, we had no borrowings under the European Facility. As of September 30, 2013, we had potential availability of $95 based on the effective borrowing base. The European Facility expires in March 2016.

Debt covenants — At September 30, 2013, we were in compliance with the covenants of our financing agreements. Under the Amended Revolving Facility and the senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types.

Note 12. Fair Value Measurements and Derivatives

In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market participants would use in pricing an asset or liability including assumptions about risk when appropriate. Our valuation techniques include a combination of observable and unobservable inputs.

Fair value measurements on a recurring basis — Assets and liabilities that are carried in our balance sheet at fair value are as follows:

Fair Value Measurements Using

Quoted

Prices in

Active

Markets

Significant

Inputs

Observable

Significant

Inputs

Unobservable

September 30, 2013

Total

(Level 1)